Swedish CB Told to Reconsider Inflation Gauge
World Economy

Swedish CB Told to Reconsider Inflation Gauge

Sweden’s central bank should consider formally changing its main inflation gauge to improve transparency and confidence in monetary policy, the country’s largest trade union confederation said.
The Riksbank should change the 2% target so that it no longer includes changes to mortgage costs, the Swedish Trade Union Confederation, LO, said in response to a review of monetary policy in 2010 to 2015. It also needs to look more at unemployment when setting interest rates, the group said, Reuters reported.
The Riksbank should “stabilize inflation around the inflation target and unemployment around a level sustainable in the long-term,” LO said. It rejected a proposal that parliament be given responsibility in defining and setting the level of the inflation target.
The proposal was included in a review published in January, which recommended lawmakers evaluate the target every 10 years. Both Swedish and foreign institutions, including the Riksbank itself, the European Central Bank and Harvard University, have been asked to submit their views on the report’s findings.
According to LO, the democratic control and evaluation of the Riksbank must be strengthened. LO argues policy wasn’t expansionary enough in 2012 and 2013 when the central bank held rates up amid concern over growing private debt. Trying to control too many aspects of the economy risks shifting away too much focus from the inflation target, LO said. Upholding the target is important when deciding on appropriate wage increases in collective bargaining agreements, it said.

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